David Woolman, Director of Woolbro Group, shares his thoughts with the Evening Standard.
The Chancellor unveiled a new mortgage guarantee scheme to help homeowners get onto the property ladder. Although it will not be replacing the current initiatives in place, such as the Help-to-Buy scheme, it will be a welcome addition of support for the residential sector. Even more so in London, where average house prices are higher and much larger deposits are needed for first-time buyers. The new initiative will increase affordability across the whole market for many potential homebuyers.
Before the pandemic, first-time buyers had huge sway on the property market and accounted for more than half of the homes purchased with a mortgage. The pandemic has meant there have been fewer lower deposit options available for first-time buyers, with banks withdrawing their 5% deposit mortgage offers in early 2020.
With this new scheme, there will be additional support for all buyers and more favourable mortgage offers. In addition, it should in theory speed up and simplify the mortgage application process. Traditionally, with HTB, homebuyers need to seek approval from both mortgage lenders and the government to qualify. However, with the mortgage guarantee scheme, the government will provide lenders with incentives to bring back 95% mortgages, taking on more of the risk, and ultimately, simplifying the application process.